Explanations by The Supreme People's  Court on Certain Questions Regarding The Application of The Guaranty Law

(Adopted September29, 2000 by the 1133fd Meeting of the Judicial Committee of the Supreme People's  Count, in effect as of December13, 2000)

in combination with practical judicial experience, interpretations are given as follows on the application of the Secured Interests Law of the People's  Republic of China (hereinafter abbreviated as the Secured Interests Law) on guarantee disputes in order that People's  courts correctly apply the Secured Interests Law

I. Interpretations on the General Principles
Article I
The credit of a client owing to civil relations guaranteed as stipulated in the Secured Interests Law may be deemed as valid when it does not contradict any binding laws and regulations.
Article 2
The counterluarantor may be a debtor or anybody else. The form of counter guarantee may either be the mortgage or pledge provided by the debtor or the guarantee, mortgage or pledge provided by anybody else.
Article 3
The guarantee contract shall be invalid if the guarantor is a state organ, or an institution or social organization working for public welfare in violation of legal stipulations. The losses thus~inflicted on the debtor shall be dealt with according to Paragraph 2 of Article 5 in the Secured Interests Law
Article 4
A guarantee contract shall be invalid when a company¡®s board member or manager provides guarantee for the debt of its stockowner or any other individual by means of its own assets in violation of Article 60 of the Company Law of the People's  Republic of China. Apart from what the creditor knows or ought to know, the debtor and the guarantor shall be jointly liable to make compensation to the creditor for the losses incurred.
Article 5
A guarantee contract shall be invalid if the guarantee is provided by means of property banned from circulation by law or regulation or by means of nonnegotiable property. In case the guarantee is provided by means of property restricted in circulation, the People's  court shall, when the creditor¡®s right is realized, deal with the case in accordance with the relevant laws and regulations.
Article 6
A foreign-related guarantee contract shall be invalid under any of the following situations:
(1) if the guarantee is provided without the ratification of and registration at competent state authorities
(2) if the guarantee is provided for a domestic creditor of an organ overseas without the ratification of or registration at competent state authorities
(3) if the guarantee is provided for the registered capital of a foreign-funded enterprise, or for the foreign debt of any foreign investor in an enterprise with foreign investment
(4) if the guarantee is provided by a financial institution that has no right to run foreign currency guarantee business or by a non-financial corporate legal person that has no foreign currency earnings
(5) if the principal contract is altered, and if the creditor transfers the rights under a foreigner-related guarantee contract without the consent of the guarantor and the ratification of a competent state organ unless otherwise stipulated by law
Article 7
The guarantor and the debtor shall be jointly liable to make compensation to the creditor to the principal contract for the economic losses incurred if the creditor is faultless under an invalid guarantee contract while the principal contract is valid. The guarantor shall bear a share of civil liability not more than one half of all the debt to be paid off if the creditor and the guarantor are at fault.
Article 8
The guarantor shall not bear any civil responsibility if the guarantor is faultless under an invalid principal contract that leads to an invalid guarantee contract. The guarantor shall bear a part of civil liability not more than one third of all the debt to be paid off if he (or she) is at fault.
Article 9
The guarantor may, after undertaking the responsibility of compensation to the creditor under an invalid guarantee contract, press the debtor for compensation, or within the scope of the compensation responsibility, demand the faulty counter guarantor bear compensation responsibilities. The guarantor may, according to the factual compensation responsibilities, lodge a separate lawsuit against the debtor or the counter guarantor.
Article 10
After the dissolution of the principal contract, the guarantor shall continue to bear guarantee liabilities for the civil responsibility of the debtor unless otherwise agreed upon under the guarantee contract.
Article 11
The behavior of a legal person or the legal representative or responsible person of another organization shall be valid when they enter into a guarantee contract beyond their rights unless the relative party knows or ought to know the excess thereof.
Article 12
The guarantee period agreed upon by the clients or registered according to registrar requirements shall have no legally binding effects on the existence of the rights to the objects guaranteed. The People's  court shall support the guarantor in exercising his or her rights to the guaranteed objects within two years after the termination of the prescribed period for litigation.

II.Interpretations on the Guarantee Chapter
Article 13
The guarantor shall bear compensation liabilities if he or she incurs any loss on the creditor on account of his or her failure to perform a non-monetary debt duty as agreed upon under a guarantee contract
Article 14
The People's  court shall not support-any legal person, any other organization or natural person devoid of complete compensation capability in his or her application for exemption of guarantee liabilities on plea of no compensation capability after entering into a guarantee contract in the capacity as a guarantor.
Article 15
Other organizations mentioned in Article 7 of the Secured Interests Law mainly include:
(1) solely-foreign-funded enterprises and joint cooperation firms registered and licensed according to law
(2) joint ventures registered and licensed according to law
(3) Chinese-foreign cooperation enterprises registered and licensed according to law
(4) social organizations approved and registered by civil administrations
(5) township, neighborhood and village-run enterprises approved, registered and licensed by competent authorities
Article 16
The guarantee contract signed by institutions and social organizations engaged in operating activities as guarantors shall be deemed as valid provided that there is no condition that leads to the invalidity of the contract.
Article 17
The guarantee contract shall be invalid if the guarantee is provided by a branch of a corporate without the written authorization of the corporate. The losses thus inflicted on the creditor shall be dealt with according to Paragraph 2 of Article 5 under the Secured Interests Law.
In a case of guarantee provided by a branch of a corporate with the written authorization of the corporate, the branch shall bear the guarantee responsibility for all the debts as agreed upon under the guarantee contract if the scope of the written authorization is unclear.
The corporate shall bear civil responsibility if the property of the branch thereof is inadequate to bear the guarantee liabilities.
In a case of invalid guarantee by a branch of a corporate that bears compensation responsibility, the compensation shall be made from the property under the management of the branch thereof. The case shall be dealt with according to Article 29 of the Secured Interests Law if the corporate is faulty.
Article 18
A guarantee contract shall be invalid if the guarantor is a functional department of a corporate. The creditor shall bear the responsibility for the losses thus inflicted if he knows or ought to know that the guarantor is a functional department of a corporate.
If the creditor does not know that the guarantor is. a functional department of a corporate, the losses thus inflicted may be dealt with in reference to Paragraph 2 of Article 5 and Article 29 of the Secured Interests Law.
Article 19
Where there are two or more guarantors providing guarantee for one debt at the same time or on separate occasions, the guarantors shall be considered as undertaking joint guarantees if they have no agreement with the creditor on the shares of guarantee.
The People's  court shall not support guarantors with joint guarantee liabilities in countering the creditor on the excuse of the shares of guarantee as agreed upon between them.
Article 20
Where the debtor has not fulfilled his or her obligations at the expiration of the debt period prescribed by the principal contract, the creditor may either demand the debtor perform his or her obligations or demand any of the guarantors bear full guarantee liabilities.
After the guarantors providing joint guarantees bear the guarantee liabilities, the portion of debt which the debtor is unable to repay shall be paid off by the guarantors according to the shares they have previously agreed upon. The portion shall be repaid evenly if there has been no previous agreement.
Article 21
When the guarantors providing joint guarantees have borne the guarantee liabilities according to the shares of guarantee as agreed upon under the guarantee contract, they may exercise their compensation recovery right on the debtor within the scope of their guarantee liabilities.
Article 22
A guarantee contract shall be validated in case a third party provides a written pledge to a crecitor who accepts the pledge without raising any different opinions.
A guarantee contract shall be validated where the guarantor affixes his or her signature or seal on the principal contract in the capacity of a guarantor even if the principal contract contains no guarantee clause.
Article 23
When the unspecified credit under a maximum amount guarantee contract is ascertained, the guarantor shall bear guarantee liabilities for the remainder of the credit incurred within a given period of the maximum credit.
Article 24
Where an ordinary guarantor has provided true information on the debtor¡®s performable property to the creditor after the expiration of the principal credit period, but the creditor relinquishes his or her right or is loathe to exercise the right so that the property cannot be performed, the guarantor may apply to the People's  court to exempt him or her from the guarantee responsibility within the scope of the practical value he or she provides of the property that can be performed.
Article 25
The major difficulties stipulated in No.1 in Paragraph 3 of Article 17 of the Secured Interests Law pertaining to the debtor¡®s performance of the obligations as demanded by the creditor include a lack of information on the whereabouts of the debtor, his or her emigration abroad and the information that he or she has no property to be performed upon.
Article 26
Where a third party guarantees to the creditor that he or she will supervise the special application of a special fund, that third party shall not bear any responsibility after fulfilling his or her duty of such supervision. If he fails to fulfil his or her supervision duty and thus inflicts a loss of capital. he or she shall bear supplementary compensation responsibility for the capital lost.
Article 27
Where the guarantor provides guarantee for the debtor¡®s registered capital, the guarantor shall bear joint guarantee liabilities within the scope of the inadequacy of registered capital or the amount of registered capital transferred in the askance, if the debtor¡®s practical capital does not conform with the registered capital, or if the debtor absconds with the registered capital.
Article 28
Where, during the guarantee period, the creditor transfers the principal credit to a third party according to aw, transferring the guaranteed credit at the same time, the guarantor shall bear guarantee liabilities to the transferee within the scope of the original guarantee. However, in case the guarantor and the creditor have previously agreed upon bearing guarantee liabilities for a specified creditor or on prohibiting any transfer of the credit, the guarantor shall no longer bear any guarantee liabilities.
Article 29
Where during the guarantee period the creditor allows the debtor to transfer part of the debt without the written consent of the guarantor the guarantor shall bear no guarantee liabilities for the part of debt without his or her consent However. he or she shall still bear the guarantee liabilities for the part of debt not transferred.
Article 30
Where the creditor and the debtor have altered the stipulations on the quantity, purchase price, amount, currencies and interest rates in the principal contract and where the alterations were made during the guarantee period without the consent of the guarantor, the guarantor shall continue to bear the guarantee liabilities for the amended contract if the alterations lessen the debt owed by the debtor. He shall be free from such responsibilities for any aggravation of the debt thus incurred.
Where the creditor and the debtor have altered the performance period of the principal contract without the written consent of the guarantor, the guarantee period shall remain as that originally agreed upon or that as prescribed by law
Where the creditor and the debtor have agreed to alter the contents of the principal contract but have not yet implemented the agreement, the guarantor shall continue to bear guarantee liabilities.
Article 31
No excuse during the guarantee period shall produce any legal consequences in contract interruption, suspension and prolongation.
Article 32
A contract under which the guarantee period starts earlier than or extends as long as the principal debt performance period shall be considered as one that has set no specific guarantee period; the guarantee period shall be the six months upon the expiration of the principal debt performance period.
A guarantee contract that stipulates such contents as that the guarantor shall bear guarantee liabilities until the principal and interests of the main debt are repaid shall be considered as having set no specific agreement; the guarantee period shall be two years after the date of expiration of the main debt performance period.
Article 33
Where the principal contract has not set any period for the performance of the principal duty. or has not set any clear-cut such period, the guarantee period shall start on the expiration day of the grace period when the creditor demands the debtor perform his obligations.
Article 34
Where the creditor under ordinary guarantee lodges a lawsuit against the debtor or applies for arbitration before the expiration of the guarantee period, the prescribed guarantee period for litigation shall start on the day when the judgment or arbitration ruling takes effect.
Where the creditor under joint guarantees demands that the guarantors bear the guarantee liabilities before the expiration of the guarantee period, the prescribed guarantee period for litigation shall start on the day when the creditor demands performance of guarantee liabilities by the guarantor.
Article 35
The People's  court shall not support any guarantor who bears guarantee liabilities or has provided guarantee for outstanding debts in the prescribed period for litigation in making any protest on grounds that the case is beyond the prescribed period for litigation.
Article 36
In a case of ordinary guarantee, the prescribed period for guaranteed debt litigation suspends with the suspension of the prescribed period for litigation on the principal debt; in a case of joint guarantees, the said period shall not suspend with the suspension of litigation on the principal debt. In a case of both ordinary and joint guarantees, the prescribed period for litigation for litigation on the debt guaranteed shall suspend at the same time with that for litigation on the principal debt.
Article 37
Where a maximum amount guarantee contract has not set any or any clear-cut guarantee period, then the guarantee period shall be six months after the expiration date of the liquidity period, provided there is such a period agreed upon under the maximum amount guarantee contract. The guarantee period shall be six months after the day of termination of the maximum amount guarantee or six months after a written notice about the guarantor¡®s termination of the guarantee has reached the creditor.
Article 38
Where the same debt is not only guaranteed, but is also pledged materially by a third party, the creditor may request either the guarantor or the material guarantor to bear guarantee liabilities. Where the clients have not set any or any clear-cut scope of the guarantee, a guarantor under guarantee liabilities may either claim repayment from the debtor or demand the other guarantor pay off the share due to him or her.
When the material pledge contract of a debt both guaranteed and pledged materially is ascertained as invalid or cancelled, or when the pledged objects have vanished due to force majeure and there are no substitutes thereof, the guarantor shall continue to bear guarantee liabilities as agreed upon under the contract or as prescribed by law.
Where the creditor is loathe to exercise the right to the guaranteed objects after the expiration of the principal contract performance period, thus causing a value reduction, damage or destruction thereof shall be considered as relinquishing the material pledge in part or in whole. The guarantor shall be liable to lessen or exempt from his or her guarantee liabilities within the scope of the creditor relinquishing his or her rights.
Article 39
The guarantor shall be free from any civil responsibility if the clients of the principal contract agree to repay the old debt with the new loan unless the guarantor knows or ought to know the information. The previous article shall not apply to a guarantor for both the new loan and the old debt.
Article 40
If the debtor of a principal contract misleads or forces the guarantor to provide guarantee with fraudulent or coercive methods and against the guarantor¡®s true will, the case shall be dealt with according to Article 30 of the Secured Interests Law provided that the creditor knows, or ought to know the facts.
Article 41
Where the debtor and the guarantor sign the principal and the guarantee contracts in a common fraud against the creditor, the creditor may request the People's  court to nullify the contracts. The guarantor and the debtor shall bear joint compensation liabilities for the losses thus inflicted on the creditor.
Article 42
Where the People's  court has passed judgment that the guarantor bears guarantee or compensation responsibilities, it shall be made clear in the judgment that the guarantor shall be entitled to the rights specified in Article 31 of the Secured Interests Law. The guarantor shall have to lodge a separate lawsuit if the judgment does not contain the rights to claim compensations in clear-cut terms.
The prescribed period the guarantor to sue against the debtor on his right to claim compensation from the creditor shall start on the day when the guarantor starts bearing responsibility for the debtor.
Article 43
Where the practical amount of repayment is larger than the principal credit, the guarantor is entitled to exercise the right to claim the repayment within the scope of the principal credit when he or she performs his or her guarantee liabilities alone.
Article 44
Where the People's  court handles the case of the debtor¡®s bankruptcy during the guarantee period, the creditor may either apply to the People's  court for the credit, or to make claims on the guarantor for the credit rights.
The guarantor shall bear guarantee liabilities for the part of the debt not yet cleared off during the bankruptcy procedure after the creditor reports on the credit. Where the creditor demands that the guarantor bear guarantee liabilities, he or she shall make the claim within six months after the termination of the bankruptcy procedure.
Article 45
In a case where the creditor knows or ought to know the bankruptcy of the debtor, but fails to apply for the credit rights or to inform the guarantor so that the guarantor fails to exercise the right to claim for compensations beforehand, the guarantor may be exempt from guarantee liabilities within the scope of compensation probability during the procedure of bankruptcy.
Article 46
Where the creditor fails to apply for the credit rights after the People's  court accepts to handle the case of the debtor¡®s bankruptcy, the guarantors with joint guarantee liabilities shall take priority in exercising the rights to claim for compensation as the main applicants for such rights.

Ill. Interpretations of the Mortgage Chapter
Article 47
Where the client mortgages a house or any other edifice to be built legally but not yet under construction, or an edifice under construction. the People's  court may confirm the mortgage as valid.
Article 48
The mortgage shall be invalid in case the mortgaged building is confirmed by legal procedure as one built in violation of law or regulation.
Article 49
Where no application has been made for ~ certificate of ownership of mortgage, the People's  court may confirm the mortgage as valid provided that the ownership certificate thereof can be. obtained, or the supplementary registration procedures can be completed, before the termination of the court debate in the first trial.
The clients shall not protest a third party if they have not gone through the registration procedures for the mortgages.
Article 50
Where the mortgage is made up of the properties listed in Paragraph 1 of Article 34 of the Secured Interests Law, the properties registered shall be taken as the standard scope of mortgaged properties. The value thereof shall be ascertained when the mortgage rights are realized.
Article 51
Where the credit guaranteed by the mortgagor surpasses the value of the mortgages. the excess portion shall not have any priority effect for compensation.
Article 52
Where the client mortgages farm crops together with the right to use land that remains to be alienated from him, the mortgage land portion is invalid.
Article 53
Where a school, a kindergarten, a hospital or any other institution or social organization working for public welfare mortgages its own property other than educational, medical, or social welfare facilities for its own debts, the People's  court may ascertain the validity of the mortgaged facilities.
Article 54
The mortgage shall be valid where the common shareowners mortgage their common properties according to shares.
The mortgage shall be invalid if a common shareowner mortgages his or her common properties without the consent of the other common shareowners. But the mortgage shall be regarded as endorsed and valid if the other common shareowners know or ought to know the information thereon and fail to raise a different opinion.
Article 55
Confiscation or seizure of or any other safety or execution measures taken on the mortgaged properties shall have no effect on the validity of mortgage rights
Article 56
The mortgage shall not be validated where the mortgage contract has not set any or any clear-cut stipulation on the types of the principal credits and mortgaged properties, and the principal and mortgage contracts cannot be amended or presumed.
The mortgagor shall be held responsible for compensation where after the signing of the mortgage contract that has taken effect according to law, the mortgagor refuses, in violation of the principle of sincerity and trust, to go through mortgage registration procedures, thus causing losses to the creditor
Article 57
The stipulations in a mortgage contract shall be invalid under which the clients have agreed to transfer the propriety rights of mortgages to the creditor before the mortgagor is paid off at the expiration of the. debt liquidity period. The invalidity of these stipulations shall not effect the validity of the other stipulations under the mortgage contract.
The mortgagee may reach an agreement with the mortgagor on securing the mortgages in the form of depreciation if he or she remains to be paid off after the expiration of the debt liquidity period. However, where the interests of a material pledgor or any other creditor fall behind in the order of damages, the People's  court may apply to the case Articles 74 and 75 of the Contract Law.
Article 58
The serial order shall be considered as the same and the order of mortgage rights snail be ascertained accordingly if the clients go through the mortgage registration procedures at different legal registrar departments on the same day.
Where continuous registration is made for a mortgage on account of the registrar department, the first date of mortgage registration shall be taken as the authentic date of mortgage registration, and the serial order of the mortgage right shall be ascertained accordingly
Article 59
Where the clients fail to get the mortgages registered due to registrar department reasons and the mortgagor has delivered a certificate of rights to the creditor, it may be confirmed that the creditor has the priority rights to compensation for the said property. However, no protest shall be made against a third party when the mortgages remain unregistered.
Article 60
Where the mortgage is immovable property prescribed in Paragraph 2 of Article 42 of the Secured Interests Law, if the local People's  government at or above the county level has not stipulated on the registration authorities, the People's  court may confirm the registration thereof as valid if the registration is made at a land or real estate administrative department.
Article 61
The registration record of the mortgages shall be regarded as authentic when the contents of the record thereof are at variance with those of the mortgage contract agreed upon.
Article 62
The validity of mortgage rights shall extend to compensation if the right of ownership of the mortgages belongs to a third party due to attachment, mixture or processing; the validity of the mortgage rights shall extend to the objects attached, mixed or processed if the owner of the mortgages is also the owner of the objects attached, mixed or processed; the validity of mortgages shall extend to the shares of the objects owned in common if a third party and the owner of the mortgages are the common owners of the objects attached, mixed or processed.
Article 63
The validity of mortgage rights shall extend to the auxiliary objects of the mortgage if so confirmed before the establishment of the mortgage rights. However, the validity of mortgage rights shall not extend to the auxiliary objects if shared by two or more persons.
Article 64
Where the mortgage is legally sequestered by the People's  court due to failure of the debtor to perform his or her debt obligations at the expiration of the debt performance period, the mortgagor shall be entitled to receive the derivative natural and legal interests separate from the mortgage from the very day of the sequestration and in the following order of repayment
1) the fees for obtaining the derivative interests
2) the interests of the principal credit
3) the principal credit
Article 65
Where the mortgagor mortgages a property already rented out, the lease contract shall, after the mortgage right is realized, continue to be valid for the transferee of the mortgage during the period of validity.
Article 66
Where the mortgagor has rented out the mortgaged property, the lease contract snail have no binding force on the transferee after the mortgage right is realized.
Where the mortgagor rents out a mortgaged property, he shall be held responsible for compensating any loss inflicted upon the hirer if he fails to inform the hirer of the fact n writing; but if he has informed the hirer in writing that the property is already mortgaged, it shall be up to the hirer to bear the responsibility himself for the losses incurred when the mortgage right is realized.
Article 67
Where the mortgagor transfers a mortgage during the mortgage right period without noticing the mortgagee or without informing the transferee, he shall still be entitled to exercise the mortgage right if the mortgage has been registered; the transferee who has obtained the ownership right of the mortgage may pay off all the debt for the debtor and thus liquidate the mortgage right. After the transferee has paid off the debt, he is entitled to claim compensation from the mortgagor
If the mortgage is not registered, no protest shall be made against the transferee by way of the mortgage right. The mortgagor shall be held responsible for compensating the losses thus incurred by the mortgagee.
Article 68
The mortgage right shall not be affected when a mortgage is inherited or presented as a gift according to law.
Article 69
Where a debtor to several ordinary creditors, when discharging his or her debts, works hand in glove with one of the creditors in mortgaging his or her property, in part or in whole, and thus causes himself or herself to be unable to return the other debts, harming the legal rights and interests of the other creditors, the victimized may request the People's  court to repeal the mortgage behavior.
Article 70
Where a mortgagor have caused a value reduction of the mortgage, the mortgagee may either request the debtor to perform his or her debt obligations, or apply for the exercise of the mortgage right in advance if the mortgagee rejects the mortgagor¡®s request to restore the original status or to provide guarantee.
Article 71
Where the principal credit is not yet fully cleared off, the mortgagee may exercise the mortgage right on all mortgage. When the mortgage is divided up or partly transferred, he may exercise the mortgage right on the mortgage divided up or transferred.
Article 72
Where the principal credit is divided up or partly transferred, the creditors may exercise the mortgage right on the shares of credit due to them.
Where the principal debt is divided up or partly transferred, the mortgagor shall continue to guarantee the debtors in performing their debt obligations with his or her mortgages. However, the mortgagor shall no longer bear any guarantee liabilities if he is a third party, and the creditor has allowed the debtors to transfer the debts without his or her written consent.
Article 73
Where the depreciation or auction or sell up price of the mortgage is lower than the value agreed upon when the mortgage right is established, the repayment shall be made according to the realized value of the mortgage. It shall be up to the debtor to make up the gap.
Article 74
Where there is no agreement reached between the clients on the proceeds from depreciation or auction or sell up, the repayment shall be in the following order:
(1) the fees for realizing the mortgage right
(2) the interests from the principal credit
(3) the principal credit
Article 75
Where there are two or more mortgagors for one credit and the creditor relinquishes the mortgage guarantee provided by the debtor, the other mortgagors may request the People's  court to reduce or exempt them from their guarantee liabilities due to them.
When a credit has more than two mortgagors and the clients have not reached any agreement or any clear-cut agreement on the shares and order of credit mortgaged, the mortgagee may exercise the mortgage right on any or all of the properties.
After assuming guarantee liabilities, a mortgagor may claim compensation from the debtor or demand the other mortgagors pay off the shares due to them.
Article 76
Where a movable property is mortgaged to more than two creditors, the mortgagors shall be paid off according to the proportion of the credit when the mortgage right is realized if the clients have not gone through mortgage registration procedures.
Article 77
Where a property is mortgaged to two or more creditors, the property owner may protest the mortgage right in the latter order with his or her mortgage right if the priority mortgagee is the very owner of the said property.
Article 78
Where there are two or more mortgagors for one property, and where the creditor¡®s right under mortgage in the latter order comes due first, the mortgagee is only entitled to obtain compensation for the part of credit mortgaged in priority order if the value of credit is surpassed by that of the mortgage.
When a credit mortgaged by mortgage right in the priority order comes due first, the surplus purchase price after the mortgage rights are realized shall be retained for clearing off a credit guaranteed by mortgage in the latter order.
Article 79
Where there are both rights of mortgage and of pledge legally registered for one property, the mortgagee shall be entitled to receive compensation before the pledgee.
When there are both rights of mortgage and of lien for a property, the lien right owner shall be entitled to receive compensation before the mortgagee.
Article 80
Where a mortgage is lost, damaged or expropriated, the mortgagee may enjoy priority in claiming the money of insurance, or compensation or subsidy for the mortgage.
Where a mortgage is lost, damaged or expropriated, the mortgagee may request the People's  court to take security measures on the money of insurance, compensation or subsidy if the credit mortgaged is not yet due for clearance.
Article 81
The scope of credits guaranteed by maximum amount mortgage rights does not include any credit of which the mortgage has been sequestered for property safety or in the process of enforcement proceedings or which occurs after the bankruptcy of the debtor or mortgagor.
Article 82
Where the clients have altered the maximum amount or maximum amount limitation mortgage period stipulated in a maximum amount mortgage contract, the People's  court does not support them in protesting against the mortgagee in the latter sequential order by means of the alterations.
Article 83
In a case of an unspecified credit guaranteed by maximum amount mortgage, the mortgagee may exercise the mortgage according to ordinary mortgage after the credit is specified, if the credit is due for clearance.
When the mortgagee realizes the maximum amount mortgage, if the actual credit surplus goes beyond the maximum amount limitation, the excess beyond the maximum amount limitation shall be invalid for priority compensation: if that actual credit surplus is lower than the maximum amount limitation, the actual credit surplus shall be valid as the maximum amount limitation for priority compensation for the mortgage.

IV. Interpretations on the Pledge Chapter
a Pledges of Movable Property
Article 84
Where the pledgor pledges a movable property legally owned by him but without ownership rights, the pledgor shall be held responsible for compensating any loss thus incurred on the movable property pledgee who is ignorant of the pledgor¡®s lack of disposition when the pledgee exercises his or her rights.
Article 85
Where the debtor or a third party has specified an amount of money in the form of a franchise, a special reward or money of insurance, and transferred that amount of money to the creditor as a pledge for the credit, the creditor shall be entitled to receive priority compensation for the said amount of money if the debtor fails to perform his or her obligations.
Article 86
Where the debtor or a third party fails to transfer the pledge as agreed in the pledge contract, the pledgor shall be held liable for compensating any loss thus incurred on the pledgee in proportion to his or her fault.
Article 87
A pledge contract shall be invalid if the pledgor seizes possession of any collateral security on behalf of the pledgee. The People's  court shall not support any pledgee protesting against a third party on the strength of his or her pledgee rights after returning the security to the pledgor.
When a pledgee loses the possession of a security not through the fault of the pledgor, he may request the unjustified possessor to stop infringement, restore the original status, and return the security.
Article 88
Where the pledgor pledges a property under his or her indirect possession, the delivery of a written notice of the pledge contract to the possessor shall be regarded as a behavior of transfer. The behavior shall be invalid if the possessor accepts the pledgor¡®s directive in disposing of the collateral security even after receiving the notice about the security.
Article 89
Where there is no clear-cut agreement on the pledge in the pledge contract, or where the agreed pledge is at variance with the property actually transferred, the criterion shall be based on the possessed property actually delivered.
Article 90
The pledger shall be held responsible for any other property loss inflicted on the pledgee as a result of hidden defects of the collateral security, except where the pledgee accepts the security when delivered to him despite his or her knowledge that the security is defective.
Article 91
The validity of the pledge right to a movable property shall extend to an auxiliary object of a pledge.
However, the validity thereof shall not extend thereto if the object is not transferred to the pledgee¡®s possession together with the pledge.
Article 92
It shall be up to the pledgee to cover the fees for drawing a pledge when drawn according to Article 69 of the Secured Interests Law; the interest of the portion immature shall be deducted if the pledgor draws it in advance to clear off the credit.
Article 93
Where the pledgee uses, rents out or disposes of a pledge without the consent of the pledgor during~ the pledge period, he shall be held responsible for compensating any loss thus inflicted on the pledgor.
Article 94
If a pledgee transfers a pledge to a third party with the consent of the pledgor during the pledge period as a security for debts, the validity of the pledge shall be confined to the scope of the credit originally pledged, the excess shall be invalid for priority compensation. The effect of a transferred pledge shall be superior to that of the original.
If a¡® pledgee transfers a pledge to a third party without the consent of the pledgor during the pledge period as a security for debts, the pledge shall be null and void. The pledgee shall be held responsible for compensating any damages caused by the pledge transfer.
Article 95
Where the pledgee remains to be paid off after the expiration of the debt performance period., he may continue to lien the pledge and fully exercise the rights by means of the pledge. The pledgee shall return the pledge when the pledgor returns the credit guaranteed.
Where the pledgor has requested the pledgee to timely exercise his or her pledgee rights when the debt performance period expires. the pledgee shall be held responsible for compensating any losses incurred by a price reduction of the pledge as a result of his or her loath to exercise his or her pledgee rights.
Article 96
The stipulations of Articles¡® 57.62,64,71, 72, 73,74 and 80 in these Interpretations snail apply to the pledge. of movable property.
b Pledge of Titles
Article 97
Where titles to such real property as a high road bridge, highroad tunnel or highroad ferry crossing are pledged, the case shall be dealt with according to Paragraph 4 of Article 75 of the Secured Interests Law.
Article 98
Where a draft, or a check or a cashier¡®s check is pledged, the People's  court shall not support the pledgor or the pledgee in protesting the company or a good-willed third party on grounds of such a bill if he does not have any "pledge" endorsement record.
Article 99
Where company bonds are pledged, the People's  court shall not support the pledgor or the pledgee in protesting a good-willed third party on grounds of the bonds pledge if he does not have any "pledge" endorsement record.
Article 100
Where a bill of deposit is pledged, the issuing bank shall bear civil liability for any loss incurred on the deposit if it accepts a loss report after examining the pledge.
Article 101
Where an instrument, a bond certificate or a bill of deposit, storage or lading is pledged, the pledge shall be void if it is transferred or pledged again by the pledgee.
Article 102
Where the pledged draft, check, cashier¡®s check, bond certificate, or bill of deposit, storage or lading is recorded with a date of exchange or lading, the pledgee shall only be entitled to receive the money or goods when the period of debt performance expires, if the date is later than that period.
Article 103
The stipulations on transfer of stocks under the Company Law of the People's  Republic of China shall apply to cases where limited stock company shares are pledged.
Where stocks of a listed company are pledged, the pledge contract shall take effect from the date of registration of the pledged stocks at the securities registrar organ.
Where stocks of an unlisted company are pledged, the pledge contract shall take effect from the day when the pledged stocks are recorded in the name list of stockowners.
Article 104
Where the pledged stocks and stock certificates are transferable according to law, the validity of the pledge shall extend to the legal interest thereon.
Article 105
Where the property titles involved in a legally transferable exclusive trademark privileges or patents or copyrights are pledged, the pledge shall be ascertained as invalid if the pledgor transfers the pledged titles to another party or allows that party to use them without the consent of the pledgee. The pledgor shall be held civilly responsible for compensating any loss thus incurred on the pledgee or the third party.
Article 106
Where the pledger and the debtor pledging obligations refuse to fulfill the obligations as requested by the pledgee, the pledgee may sue against the pledger and the debtor who pledges the creditor¡®s right, or file a separate lawsuit against the debtor who pledges the creditor¡®s right.

V. Interpretations on the Lien Chapter
Article 107
Where the clients have agreed to exclude lien in the contract, the People's  court shall not support the creditor in exercising the right after the expiration of the debt performance period.
Article 108
Where the creditor comes into legal possession of a movable property delivered by the debtor, the creditor is entitled to exercise lien according to Article 82 of the Secured Interests Law if the creditor is ignorant of the debtor¡®s lack of disposition.
Article 109
Where the creditor¡®s right has reached the stage of clearance, the creditor is entitled to take a lien over a movable property possessed by him if the property is linked up with the incidence of the creditor¡®s right.
Article 110
Where the creditor¡®s right has reached the stage of clearance, the lien title owner may take a lien over the whole property if the property held in lien is indivisible.
Article 111
The People's  court shall not support any creditor in exercising a lien title that is incompatible with his or her obligations or anything he has specifically agreed upon by contract.
Article 112
Where it is time to perform the obligation of delivering the targeted possession, but not yet time to clear up the creditor¡®s right, the creditor shall not exercise his or her lien title. However, this does not apply in the case where he or she can prove that the debtor is incapable of making the repayment.
Article 113
The creditor shall be liable to make compensation on loss incurred in case he disposes of the property held in lien at an appraised price instead of notifying the debtor to perform his or her obligations within the time limit as prescribed in Article 87 of the Secured Interests Law. The creditor may exercise his or her lien title directly without making any notice if there is a grace period agreed upon between the creditor and the debtor in accordance with Article 87 of the Secured Interests Law.
Article 114
The stipulations of Articles 64, 80, 87, 91 and 93 in these Interpretations shall apply to the acts of lien.

VI. Interpretations on the Deposit Chapter
Article 115
Where the clients agree to guarantee the principal contract by delivery of deposit, the deposit-paying party who refuses to sign the principal contract shall have no right to demand any refunding of the deposit; the deposit-receiving party who refuses to sign the principal contract shall refund the deposit double the size thereof.
Article 116
Where the clients agree to make delivery of deposit an essential component for the conclusion or validity of the principal contract, failure of the deposit-paying party to make the delivery shall not affect the signing or the validity of the contract it has been implemented or mainly implemented.
Article 117
After the delivery of deposit, the deposit-paying party may revoke the principal contract at the expense of the deposit paid as agreed in the contract; the deposit-receiving party may revoke the principal contract at the expense of refunding the deposit double the size thereof. The Contract Law of the People's  Republic of China shall apply to the liabilities after the revocation of the principal contract.
Article 118
Where the clients have delivered the money of lien, security, guarantee, foregift, mortgage or deposit, but have not reached an agreement on the nature of the deposit, the People's  court shall not support any of them in claiming deposit titles.
Article 119
Where the actual amount of deposit delivered is higher or lower than the amount agreed upon, the case shall be considered as one of alteration in the deposit contract. The deposit contract shall not take effect if the receiver raises an objection and refuses to accept the deposit.
Article 120
The principle of fining may apply to a client who procrastinates to perform the contract or commits any other violation of the contract, thus causing the failure to realize the purpose of the contract, except otherwise prescribed by law or otherwise agreed upon by the clients.
The principle of fining may apply to a client who fails to implement the contract completely. The fine shall be proportionate to the ratio of the failure to the whole contract.
Article 121
Where the amount of the deposit agreed by the clients exceeds 20 % of the targeted amount under the principal contract, the People's  court shall not support the excess.
Article 122
The principle of fining shall not apply to a case where the principal contract cannot be implemented due to some force majeure or accident. However, that principle shall apply where the failure to implement the principal contract is due to the fault of a third party outside the contractual relations. The fined party may claim compensation from the third party according to law.

VII. Interpretations on Other Issues
Article 123
Were there are several securities for one credit, the other guarantors may lessen or exempt from guarantee liabilities within the scope of the rights relinquished if the creditor relinquishes the material guarantee of the debtor.
Article 124
Where a branch organization of a corporate provides guarantee for anybody else, the People's  court may involve the corporate in the lawsuit as a co-defendant when trying the case of guarantee dispute. This does not apply where the guarantor is a branch of a commercial bank or insurance company.
Article 125
Where the creditor under ordinary guarantee sues against the debtor and the guarantor, the People's  court may list them together as co-defendants in the lawsuit. However, it shall be ascertained in the judgment that the guarantor shall bear guarantee liabilities if the debtor is still unable to perform his or her obligations after enforced execution of his or her properties.
Article 126
A creditor under joint guarantee may sue against the creditor or the guarantor as the defendant, or against both of them as co-defendants.
Article 127
Where the debtor sues against, and is countercharged by, the creditor, the guarantor may join the lawsuit as a third party.
Article 128
Where the creditor requests the People's  court to exercise the rights to a security, the debtor and the guarantor shall join in as co-defendants.
Where there is both guarantee and material pledge for a credit, the debtor and the guarantor, mortgagor or pledgor may join in the lawsuit as joint defendants if the clients lodge a lawsuit due to some dispute or other.
Article 129
A case of dispute on both the principal and the guarantee contracts shall be administered as a case of dispute on the principal contract. If the guarantee contract case is a case of dispute where the guarantor bears joint liability, it shall be up to a resident court of the guarantor to take up the case when the creditor raises claims against the guarantor.
Where there is a difference in the choice of courts of jurisdiction for the principal and guarantee contracts, these contracts shall be administered according to the principal contract.
Article 130
In a case of dispute on the principal contract, the People's  court shall not directly execute the guarantor¡®s property according to the judgment or ruling on the clients thereof without trying on the guarantee contract.
Article 131
The expression "the debtor cannot clear off the debt" as used in these Interpretations means that the debtor remains in debt after the execution of his or her savings deposit, cash, marketable securities. finished and semi-finished articles, raw and other materials, means of transport and other executable movable properties as well as other properties easy to execute.
Article 132
Where the clients provide property guarantee during the judicial or execution proceedings, the people¡¯s count snail sequester the certificate of the property while sending a written notice to departments concerned at the same time, requesting them not to accept any transfer procedure of the property pledged.
Article 133
Laws and regulations and their interpretations effective at the time of incidence of the acts of guarantee shall apply to the acts of guarantee that occurred before the enforcement of the Secured Interests Law.
Where a final trial has been held on a disputed guarantee act taken after the enforcement of the Secured Interests Law but before the release and enforcement of these Interpretations, these Interpretations shall not apply when the clients apply for a retrial or when the retrial is decided upon according to judicial and supervisory procedures.
The Secured Interests Law and these Interpretations shall apply if the case of dispute was still at the stage of the first or second trial prior to the release and enforcement of these Interpretations.
Article 134
Judicial interpretations given by the Supreme People's  Court on guarantee prior to the enforcement of the Secured Interests Law that contradict the Secured Interests Law and these Interpretations shall no longer apply.

Related link:Property law of PRC(2007)
                  Guarantee Law (1995)